Washington ? The Supreme Court on Monday heard arguments in a Kansas case involving the power of states to tax fuel sold on Indian reservations, a source of increasing conflict as more retailers thrive on tribal lands.

At issue is whether Kansas can tax distributors who sell fuel to a gas station owned and operated by the Prairie Band Potawatomi tribe. Gamblers driving to the tribe’s casino 15 miles north of Topeka, Kan., often stop for gas at the reservation’s “Nation Station.”

The Denver-based 10th U.S. Circuit Court of Appeals ruled that the tax violated tribal sovereignty even though it was not directly imposed on the tribe.

A lawyer for the state argued Monday that Kansas is not trying to regulate tribal activity, but is simply taxing non-Indian companies, based outside the reservation, that distribute fuel to tribal operators. All the tax money goes to keeping up state roads used by Kansas drivers on their way to the casino.

“The why, when and where of the tax is all off-reservation and non-Indian,” said Theodore Olson, the former U.S. solicitor general, arguing on behalf of Kansas.

The tribe asserts that it collects its own taxes on the fuel to help maintain the reservation’s road system, recognized as one of worst in the nation. Allowing the state to impose a fuel tax runs contrary to federal policy encouraging economic development on tribal lands, said Ian Gershengorn, lawyer for the tribe.